National Living Wage cuts number of low-paid workers by 300,000

Economic News

National Living Wage cuts number of low-paid workers by 300,000

Thu, 12 October 2017
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National Living Wage cuts number of low-paid workers by 300,000

(ShareCast News) - More than 300,000 low-paid Britons were given an added boost to their pay packets after former chancellor George Osborne's National Living Wage (NLW) scheme coalesced into the biggest year-on-year fall in low pay since 1977.
However, according to a report published on Thursday by thinktank the Resolution Foundation, the UK remained far too reliant on low paid workers, which it defined as employees who earned less than two-thirds of the median hourly wage of around £8.25.

The introduction of the NLW, which imposed a minimum hourly payment of £7.50 for employees aged 25 and over, brought the number of low paid workers in the UK down to 5.1m, or 19% of the country's total workforce, from the 5.4m it had been a year early, making 2017 the first time less than one-fifth of the population were considered to be low paid since the 1980s.

The report suggested that gender inequality in the workplace was still very prevalent, with women making up 61% of the total.

While the NLW had benefited several people employed by British businesses, the Resolution Foundation said that people earning below the voluntary living wage had reached an all-time high as it ticked up from 6m in 2016 to 6.2m a year later.

The voluntary living wage of £17,900 for single people and £20,400 per person for couples with two children, measured by the Joseph Rowntree Foundation, was seen as the minimum amount need to maintain an acceptable standard of living.

At the time Osborne unveiled the NLW programme in April 2016, business leaders across multiple sectors accused the government of introducing a tax on jobs that would see thousands of employees being made redundant due to weaker margins, but in the time since the NLW was enacted employment had risen at the same time unemployment dropped to its lowest level in four decades.

Conor D'Arcy, a senior policy analyst for the Resolution Foundation, said, "Many people warned that the national living wage would be a jobs-killing disaster. It's early days still but the result so far has been the biggest fall in low pay for four decades, in an economy where employment is at a record high."

"While it's important to celebrate the national living wage as a bold, positive policy action, we shouldn't get complacent. As well as the challenges it presents to some employers, more than four million workers are still expected to be in low pay by 2020, and the old problems of women and part-time workers being far more likely to be low paid than men remain," he said.

Although three-quarters of people aged 16 to 20 still fell into the low pay category, the report demonstrated a "domino effect" that led to a 3% decline in low paid young workers despite the NLW only being legally applicable to those over the age of 25.

Regionally, Yorkshire and the Humber, and the East Midlands were the regions with the lowest paid workers at 24% and at the other end, only 10% of employees in London were considered low paid.

Across the other city regions, Sheffield (24%), Nottingham, Liverpool and Newcastle (23%) were all at the top of the low-pay rankings.

The Resolution Foundation said it would continue to explore "the likelihood of low paid workers moving into higher-paid roles," as it said, "overall, pay has performed badly since the recession with average weekly earnings currently £16 a week below their pre-crisis peak in 2008."